Contingency management theory
Contingency theory stresses the need for flexibility and adaption to management practices and ideas to suit changing. This approach recognizes that simple principles do not always apply in all organizations, thus managers need to be flexible and adaptable to suit the changing circumstances. It points out that each situation requires its own unique solution. A contingency approach enables managers to adopt the style most appropriate to the situation. In times of rapid change they may choose to be more formal and autocratic, but at other times they may be more democratic and inclusive.
Qantas operates in a dynamic business environment, it has to adapt to the constantly vigorously changing environment and solve any problems by adopting a contingency theory. Management practices are now more flexible and suited to changing circumstances, e.g. quick changes to terrorism, Iraq war, SARS, increases in fuel prices, economic downturn and changing market circumstances of low cost airlines. Each of these situations need a unique solution. These changes in management have enabled a more efficient and productive Qantas, being able to deal better with changes in the internal/external environment more effectively.
Qantas management recognizes that all its individual parts contribute to the whole organization. Changes in one area, influence performance and create impacts in other parts. They are aware that these parts are interrelated, and management makes sure they are coordinated so that it can achieve its goals.
In order to achieve synergy (all parts cooperate to aim for a common goal).
Qantas operates in a dynamic environment. Management practices at Qantas are more flexible and adapted to suit changing circumstances (contingencies). For example Qantas has responded quickly to circumstances such as terrorism, the Iraq war, changing market circumstances, rapid increases in fuel prices and the success of rival low cost airlines.
Each of these circumstances require its own unique solution. Qantas has developed a 2 brand strategy (qantas and jetstar) has given Qantas the flexibility to adjust capacity, pricing and market segmentation as circumstances change.
The outcome of using more modern management theories has enabled Qantas to deal with changes in the internal and external business environment more effectively and overall provides a more productive and efficient management structure.
E-Commerce/New Systems & Procedures
Qantas has continued to develop its website by including a faster booking engine; customer access to alternative fares; increased alternatives for customers searching fro lowest priced itineraries; and an online check-in.
Launched eQ, which streamlines corporate human resources and creates an internet based inventory management system.
Upgraded security systems (>$600 million) and introduced new procedures for all flight and cabin crew. Self service kiosks at all its major airports help automate check in process.
Structural Response to Change
– Has increasingly looked to outsourcing to become more cost effective and to simplify its business.
– Qantas has outsourced nearly all IT operations. IBM has taken over Qantas’ data centres and Telstra has been handed domestic voice, data and domestic services.
– Low cost carrier Jetstar has outsourced its entire call centre to Melbourne operator sales force
– Already contracts some maintenance jobs overseas in Singapore and New Zealand
– Also established a base in London for 400 of its international flight attendants saving approximately $18 million through rostering efficiencies and reduced accommodation and allowance costs.
Flat Business Structures:
– Fewer layers of management and widening span of control. This is aimed at cutting costs and speeding up decision making to make Qantas more flexible and adaptable to change.
– CEO Alan Joyce (2009) – ‘Qantas must respond to what is happening, and our response must begin with those who lead the company. We are making long term organisational changes to develop a leaner, more fast moving organisation.”
Reasons for resistance to change
– Purchasing new equipment. New and more efficient aircrafts. Qantas has planned for 158 new aircrafts planned for delivery between 2011 and 2018 as part of a fleet renewal program at the cost of $US 22 Billion.
– Inflight entertainment systems
– Security measures such as new passenger screening equipment and surveillance equipment throughout all baggage handling areas.
– As previous responses to internal and external influences Qantas has been de-layering their organisational structure to have a more flatter business structure to be more flexible and adaptable to change. As a result it leads to the many employees being made redundant as their needs are no longer their required this incurs large compulsory payments.
– As a way to manage large redundancy payments (in 2009 redundancy costs totaled $106 million) for the future, it is trying to rely on increasing the number of casual and part-time employees to reduce the need for large redundancy payments.
– Any significant change at Qantas requires staff to learn new skills especially when new technology is introduced.
– Re-training of 10,000 staff as a result of the reservation system to Amadeus (new systems and procedures).
– Qantas has created a ‘Qantas College Online’ as an online learning programme. This eliminates the need for managers to repeat information and training material to new employees as it they can self-educate themselves online.
– Retrained cabin crew for new international business class.
Re-Organising Plant Layout
– As Qantas acquires new aircrafts it must continually reorganise the layout of its maintenance operations to try and increase capacity and efficiency. For example JetStar is replacing its Boeing 717’s with Airbus A320’s and as a result must look for a new heavy maintenance base because its Newcastle base will not accommodate the larger planes.
– Considering Qantas intends on outsourcing many areas of the company and also reduction in the size of the permanent workforce and hiring more part-time/casual staff to increase workforce flexibility has made employees fearful of change as they feel it may threaten their job security. Employees may also resist change because:
* Their current skills are no longer required due to new work methods
* Required to retrain or learn new skills
* Disruption of existing work relations and patterns of behaviour
* Resentment over not being consulted about proposed changes
* Feelings of personal inadequacy and insecurity.